Hospitals with expensive tech, high patient satisfaction have highest-paid CEOs

What not-for-profit hospitals pay their CEOs has little to do with financial performance or quality scores, but the top executives generally make more at hospitals with expensive technology and high marks in patient satisfaction, according to a new study published in JAMA Internal Medicine.

The researchers drew data on 1,877 CEOs overseeing 2,691 hospitals from the Form 990 their organization submitted to the IRS for the 2009 tax year.

Compensation varied widely, the researchers found. The executives earned an average of $595,781 in compensation, according to the study. CEOs at small, nonteaching hospitals earned the least with a median compensation of $117,933, while the highest-paid CEOs generally led larger, urban hospitals that are typically teaching facilities. Those executives earned median compensation of more than $1.6 million.

The research team, including lead author Dr. Karen Joynt of the Harvard School of Public Health, concluded there's little information available on what affects CEO compensation. However, hospitals earning higher patient satisfaction scores tended to pay more (about $52,000). CEOs also earned more—a $136,000 bump, on average—if their hospitals had the technology in place to perform complex operations. Advanced imaging was also linked with substantially higher earnings.

The study, “Compensation of chief executive officers at nonprofit U.S. hospitals,” found no significant connection between pay and a hospital's financial performance or performance on process quality, mortality or readmission rates.

In an accompanying commentary that appears in the same issue of JAMA Internal Medicine, Dr. Warren Browner, CEO of California Pacific Medical Center in San Francisco, wrote he wasn't surprised by the study's findings that “bigger, glitzier, more prestigious hospitals,” paid more compared to other facilities. However, Browner took issue with some of the study's findings. He wrote that researchers leapt to conclusions about causality without considering the full range of variables. For instance, Browner wrote that researchers cherry-picked only a few quality metrics to prove pay wasn't linked to quality.

“A more likely explanation for the absence of a correlation between CEO pay and quality is that hospitals are concerned about, measure and reward different quality metrics—and Joynt et al looked at only a few of the several hundred possibilities,” Browner wrote.

The study's authors also calculated the premiums paid to CEOs based on the numbers of hospitals and beds under their supervision. CEOs earned about $550 for each additional bed and $34,609 per additional hospital.

Leaders of major teaching hospitals earned an average of $425,078 more compared with their counterparts at nonteaching hospitals. CEOs of hospitals with higher proportions of poor and Medicare patients earned less.